W-2 vs 1099 vs S Corp Calculator
Same contract. Three very different paychecks. Enter your numbers to see exactly what you'd take home under each structure.
As a sole proprietor we assume you buy your own health plan at the same monthly cost as the W-2 plan. In the S Corp column, coverage comes through the Lettuce health plan at $500/month.
Through an S Corp, a contract of — already matches everything your — W-2 was worth.
Without the S Corp you'd need — to break even — the structure alone is worth —.THE FREELANCER'S MOVE
1099 via S Corp
The green column doesn't require a finance degree. Lettuce forms your S Corp, runs payroll, and files everything automatically, so you get the freedom and keep the money while doing zero of the paperwork.
No Ceiling
A salary caps your year. A rate compounds: raise it, add a client, and the whole increase lands in your column.
Work when you want
Six weeks off, a four-day week, school pickup every day. You design the calendar and price it in.
Built to Grow
Start as a contractor, elect S Corp as income grows, and keep more at every step. The structure scales with you.
Why the Math Matters More Than the Label
Here's something most contractors don't know: the label on your contract - W-2, 1099, S-Corp - is one of the biggest financial decisions you'll ever make. And most people make it without running the numbers.
As a W-2 employee,
your employer handles half of your payroll taxes. Straightforward, but you're also leaving deductions and retirement strategies on the table.
As a 1099 independent contractor,
you gain flexibility and access to powerful deductions — but you're now on the hook for the full 15.3% self-employment tax on your net income. That shock to the system surprises a lot of solopreneurs in year one.
As a 1099 filing through an S-Corp,
the picture changes. By splitting your income between a reasonable salary and shareholder distributions, you only pay payroll tax on the salary portion. The result? The same work, a structurally lower tax bill.
FAQs
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What is the difference between W-2 and 1099?
A W-2 employee has taxes withheld by their employer, who also covers half of payroll taxes (Social Security and Medicare). A 1099 independent contractor receives gross pay with no withholding and is responsible for the full self-employment tax — currently 15.3% — on top of federal and state income taxes. The trade-off: 1099 status comes with access to more deductions and greater flexibility.
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How much more should I ask for as a 1099 vs W-2?
A good rule of thumb is to add 25–30% to your equivalent W-2 salary to account for self-employment taxes, benefits you'll need to self-fund (health insurance, retirement), and the unpredictability of contract work. Use this calculator to model your specific situation — general rules only get you so far.
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What are the benefits of 1099 vs W-2?
As a 1099 contractor, you can deduct a wide range of business expenses, contribute to a Solo 401(k) or SEP IRA with higher limits than a typical 401(k), deduct 100% of health insurance premiums, and potentially claim the 20% Qualified Business Income (QBI) deduction. The catch: you handle your own taxes, including quarterly estimated payments.
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Is an S-Corp worth it for a 1099 contractor?
For most solopreneurs earning above approximately $80,000 per year in net self-employment income, an S-Corp election can generate meaningful tax savings by reducing the amount of income subject to self-employment tax. Below that threshold, the administrative costs of running an S-Corp often outweigh the savings. Use this calculator to see the estimated difference for your income level.
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What is 1099 income vs W-2 income?
W-2 income is employment income reported by an employer, with taxes withheld at source. 1099 income is business or contractor income reported directly by the payer — no withholding, full SE tax liability. Both are subject to federal and state income tax, but the SE tax treatment is fundamentally different.
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Does Lettuce help me set up an S-Corp?
Yes. Beyond running your numbers, Lettuce provides guidance on S-Corp structure, reasonable salary determination, and ongoing payroll and tax management.
Specialized tax and accounting strategies for businesses-of-one.
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